Automakers put the brakes on incentive leasing
By Michelle Warren • Bankrate.com
When Peter Warren was shopping for a new car earlier
this summer, he was looking for two things: reliability and a great
deal on a lease. At Nissan, he got everything he wanted in a 48-month
low-interest lease, with the added bonus of the dealer covering
his first three payments.
"It was the best option," says Warren who was bent
on leasing because he didn't want the added maintenance costs of
buying a used car and did not have the means to purchase a new vehicle
outright. "The monthly payments would have cost about twice as much,"
he says, with financing.
In addition, he plans to grow his Cambridge, Ont., family and when that time comes, he'll be in the market for something
bigger. "We wanted a full warranty and we didn't want to be stuck with selling a car in four years; this way, we can just bring it back."
GMAC pulls back
Today, Warren wonders if in four years' time, leasing another vehicle will still be an option. During the past couple of months, a handful
of automotive companies and their financial counterparts have put the brakes on leasing-related incentives, and some industry watchers wonder
if this is the beginning of the end of affordable leasing for individual buyers.
GMAC Financial Services, the financial arm of General
Motors Corp., created a stir when it announced in July that it was
suspending incentivised lease offers in Canada, citing market conditions,
the inability to secure funding for reduced rates, and the steep
drop in the residual value of used vehicles.
The move is significant here where more than 40 percent
of all vehicles are leased, compared to about 25 percent in the
U.S. GMAC, the biggest auto lender in North America in terms of
volume, isn't the only one shying away from leasing. Chrysler LLC
announced earlier this year that its financial arm was getting out
of the U.S. automotive leasing business, and Ford is also tightening
credit terms and raising prices for leasing trucks and SUVs, a move
positioned to make it unattractive to lease vehicles for which resale
values have plummeted.
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